How quickly we moved from worrying about the worst health crisis in living memory to the worst humanitarian crisis in Europe since WW2.
Russia President Vladimir Putin’s invasion of Ukraine upended the political risk landscape overnight, triggered the most coordinated and far-reaching set of sanctions ever seen – and pushed the price of oil to levels not seen since the ‘heyday’ of 2008 when crude hovered just under $150 a barrel.
While the decoupling of Russia from much of the rest of the world economy will have a prolonged and dampening effect on growth in most leading markets – there will be some nations on the receiving end of increased revenue flows from hydrocarbon sales at higher prices.
This means that Saudi Arabia, the UAE, Bahrain and Kuwait are likely to see their coffers fill quickly from the inflated price of oil – while Qatar will benefit from a similar increase in the price of gas.
Gulf nations once again ‘awash with cash’ can only be good news for the insurance and reinsurance communities as formerly-stalled projects are fast-tracked and new infrastructure projects move from the drawing board into the implementation phase.
The biggest winner from the rise in the price of oil is likely to be Saudi Arabia, the subject of this issue of MEIR’s market profile, with its far-reaching development goals as outlined in Vision 2030.
Vision 2030 is a framework envisaged to reduce the kingdom’s dependence on oil while diversifying its economy into other areas, including financial services. The irony of using windfall oil revenues to help diversify the economy away from oil will not be lost on the architects of the plan.
What seems beyond doubt is that the insurance and reinsurance sectors in Saudi – and the other hydrocarbon-rich Gulf states – are likely to see a significant uptick in business. It might not be the crazy, unchecked growth that they saw 15 years ago, but it is likely to be substantial.
For many insurance and reinsurance CEOs in the region, one concern they may have is whether or not they have sufficient human resources to accommodate this unbudgeted growth.
Some readers will remember that the dearth of qualified insurance talent was one of the biggest issues raised issue by CEOs in last month’s UAE insurance roundtable, organised by MEIR.
The lack of talent was also manifest in the sharp increases in remuneration and packages for qualified people that CEOs had seen of late when trying to hire staff.
It would be a serious deficiency in forward planning if the boon to insurance business occasioned by the rising price of oil and the revenue windfall that it will bring is not seized fully by players in the sector – since such events do not come around often.
Equally importantly, as ESG concerns make their way closer to the top of the agenda for many corporates, the days of consuming hydrocarbons in vast quantities surely must be numbered. This oil price spike may be the last hurrah.
It was a new day yesterday.
But it’s an old day now.
Paul McNamara
Editorial director
Middle East Insurance Review